I have dreams of retiring as a millionaire, the only problem is that I’m stuck here working this really low-salary job. In fact, I’m only making about $30,000 a year and so I don’t really think retiring as a millionaire is in my future. Not so fast. Who are you? It’s me Kienma Prince and I’m here to tell you that anybody can retire a millionaire including you.
It’s actually a lot more doable than you probably think. All you need is a little patience, and some discipline, read the rest of this post and share it.
Now, I’d like to bring your attention to a guy right here his name is Ronald Reed. He was born in 1921 into a poor family of farmers and worked as a janitor and gas station attendant. For most of his life, he was a normal modest guy, he enjoyed collecting stamps and coins and eating breakfast at friendlies.
By all standards Ronald was a regular guy, however, there’s one part of the story that I forgot to mention outside of his stamp collection and his tattered appearance, Ronald had a secret when he died in 2014 at the age of 92. It was soon discovered by his friends and family that he had amassed a fortune an $8 million fortune to be exact.
But how is that even possible? How could this guy right here born into a poor family and living his entire life earning a small income build up such a huge fortune?
The answer lies right here. Investing, but it’s not really enough to say that he invested his way into building his wealth. Because that leaves a lot of questions like what exactly was he investing in or how long was he investing or how often was he investing?
There are a lot of questions that need to be answered, and if you actually have a goal of retiring a millionaire while earning a low salary, then you’re going to need some kind of blueprint and lucky for you you clicked on this post. I happen to have that blueprint.
Blueprint Part One
The first part of this blueprint is going to be to start setting money aside from every paycheck. Now, I’m not going to leave you hanging by saying save your money. We all know that we should be saving our money, it’s a good habit to have but it’s really difficult to actually follow through on and implement into your life on a long-term basis unless you actually have a plan in place.
I happen to have a plan that I use in my life that works really well for me that you guys can implement into your life as well and so here’s that plan.
Step One. Automate Your Savings.
I have it set up so that each week money is automatically moved from my account into my brokerage account where it’s then invested. The reason that I automate this process is that it helps me to basically remove any obstacles that would get in the way of me saving money.
For example, how often have you said to yourself I’ve really got to start saving money? You know what, I’m going to start off by saving $50 from this week’s paycheck”. And then when payday rolls around, you either forget that you said that you were going to save that money or you convince yourself that you don’t need to save that money anymore but instead, you go and spend it on something else that you don’t even need this happens all the time.
And what I found is that by automating this entire process of saving you basically remove any of the friction involved with saving. And because all this is happening in the background of your life automatically, you kind of forget that you’re saving money in the first place. That’s because the moment you get paid that money is taken out of your account and put somewhere else and so it’s almost like it was never even there in the first place.
You’re not really missing out on anything but then in the background of your life your wealth is slowly being built because you’re slowly saving money from every single paycheck. And that money that’s being saved is then being invested and your wealth is slowly being built without you even realizing it.
Step Number Two: Determine How Much to Save
|20-24||$8-$13 per week|
|25-29||$14-$22 per week|
|30-34||$24-$40 per week|
|35-39||$45-$70 per week|
|40-44||$79-$127 per week|
|45-49||$144-$238 per week|
|50-54||$270-$459 per week|
|55-60||$530-$1,133 per week|
So, I’ve taken the time to lay out this oversimplified table above, and what you’ll notice is that I’ve given you a breakdown by age of how much money you’ll need to save every single week and invest in order to retire a millionaire.
Now, feel free to spend time on the chart so that you can take a closer look at it. But one thing that you’ll notice is that it doesn’t require a lot of money at all depending on your age to reach that million-dollar mark. But what it does require is that you invest your money consistently whether it’s weekly, or monthly, whatever works best for you.
If you are consistently investing your money into the stock market over a long period of time, then it’s inevitable that you will be a millionaire if the stock market continues to give returns as it has in the past. These numbers on the chart above are based on a 12% return assuming that you invest your money into a low-cost Index fund or ETF. Something like VOO has returned a little over 15% on average each year over the past 10 years. I’m just bringing that number down to 12% to be on the conservative side and also make up for inflation.
Let’s just say for example that you’re 30 years old right now and you don’t plan on retiring until you are 70. I mean, after all, that is the new retirement age. And if you can simply invest $25 per week or $100 per month over the next 40 years, you would clear $1 million dollars at retirement. If you’re younger than 30, fantastic, that means you have a lot more time and you can invest less money over a long period of time to still hit that million-dollar mark.
But if you’re a little bit older than 30, that’s still not a problem. Obviously the more you progress in life the more catching up you’ll have to do with your investing. If you’re still in your 20s or 30s, you start saving and investing the amount that you see on the chart, then you will without a doubt retire a millionaire especially if you can follow the next two parts of the blueprint.
Blueprint Part Two
The second blueprint is to invest the money that you save into a tax-advantaged account and more specifically the Roth IRA. Now, the reason I love the Roth is that it allows you to invest your money and build wealth without actually being taxed on all of your gains.
For example, let’s say that you spent the last 30 to 40 years saving and investing your money and you finally passed that one million dollar mark, but what’s even better than the million dollars though is that the moment you start taking money out of your Roth IRA to live off of as income during retirement, that money will not be touched at all by good old greedy Uncle Sam.
The best part is that a Roth IRA is completely free to open and it’s super easy. It takes like 15 minutes, you can do it at any broker.
At this point, I know how much money I should be investing and where to invest it. But my next question is, what should I be investing in? My friend’s uncle said that I should be investing in some kind of penny stock or something like that.
The good news is that you don’t have to be an expert investor to be successful. Even if you know nothing about investing and you have no desire to learn anything about investing, you can still be successful and retire a million.
Index Funds or ETFs
The best and easiest way to invest in the stock market is going to be to invest in broadly diversified Index Funds or ETFs. If you’ve been reading my blog for some time now, you know that I love talking about Index Funds and ETFs. They’re my personal favorite way of investing in the stock market because they basically just allow the average investor to get amazing returns in the stock market without having to know a lot about investing and without having to spend too much time researching individual stocks.
For example, let’s say that you wanted to invest in the S&P 500 which is an index that tracks the 500 largest companies in America. Instead of buying all 500 stocks that make up the S&P 500, you could simply go and buy shares of an ETF or Index Fund that tracks the S&P 500.
For most people including myself, I don’t have time or the desire to go and research individual stocks knowing that I can just simply go and invest my money into a well-diversified low-cost ETF that’s going to invest in thousands of stocks at once and give my portfolio exposure to an entire index instead of just individual stocks.
So just a really quick recap, invest your money into a low-cost Index Fund or ETF inside of a tax advantage account preferably a Roth IRA, and preferably over a long period of time like 30 to 40 years to really give your money time to grow and compound.
Blueprint Part Three
The final part of the blueprint is to let the power of compounding take over once you begin investing.
If you don’t know what compounding is, Albert Einstein once called it the eighth wonder of the world, and he’s also said about it that “he who understands it earns it, and he who doesn’t pay it”.
What exactly is compounding and how is that going to help me to retire a millionaire, especially while I’m stuck working? In very simple terms, compounding is when your earnings from your investments are reinvested back into buying more investments, and then those new investments earn you more money which is then reinvested back into buying more investments. This cycle just continues on and on and on until you’ve got this massive growth.
Earnings could be from dividends which are typically paid every quarter by dividend-paying companies. It could be capital gains from when you sell stocks and you earn a profit from that capital gain.
Would You Rather
To kind of help you understand compounding a little bit more, I’m going to give you an example and we’re going to play a game of would you rather. Would you rather have somebody give you one million dollars at the beginning of next month, just one flat check or would you rather somebody give you one penny at the beginning of next month however, that one penny doubles every single day for the next month.
If you chose to receive the 1 million dollars at the beginning of next month, that’s fantastic because that’s still 1 million. However, I’m afraid to tell you that you missed out on 4.3 million additional dollars than if you would have went with the one penny that doubled every day for a month.
So, if a penny doubles every day for 30 days, by day 30 it will have compounded to over 5.3 million dollars. And while compounding in the investing world doesn’t quite work exactly like this, it still serves as a solid example of the power of compounding.
With the penny, it wasn’t until around day 20 near the end of the month that you’ll really start to see some significant gains. And because of the compounding effect, those gains got larger and larger with each passing day and the same exact thing is true with your investing journey.
Right at the beginning of your investing journey, you’re investing $25 or $30 per week and it seems like nothing’s really happening, it seems like it’s going be impossible for you to reach that million-dollar mark by the time you retire. But if you continue investing a little bit each week or each month over a long period of time, just like with the penny example what you’ll notice is that about halfway through your investing journey, you’ll start to see exponential growth.
Real Life Example
Even if we were to look at a real-life example, let’s say that you’re investing $25 per week over a 40-year period with a %12 return, it’s not until about halfway through the 40 years that we really start to see compounding take effect. But at that 20-year mark the growth becomes just uncontrollable, it becomes exponential. That growth is just from $25 per week over a 40-year period.
Imagine if you become more aggressive and say you doubled your investment to $50 per week or $200 per month. Well, you’ve essentially doubled your wealth at retirement, and the more aggressively you invest over a long period of time the more wealth is built through compounding.
The absolute best part about this is if you follow part two of this blueprint for investing inside of a Roth IRA, then all the money that you earn is going to be tax-free. Peace and Happy Hustling!